Sen. Pat Toomey (left) and Congressman Jim Gerlach (right) speak with Thomas Krug, founder and president of Lite Tech Inc., about the effect of Medical Device Tax on small businesses. (Photo by Rick Kauffman)

LOWER PROVIDENCE — The eight-month-old Medical Device Tax has already shown signs of devastating an industry fueled by startups and giants alike and must be repealed.

That was the message of Republican Sen. Pat Toomey and Congressman Jim Gerlach (PA-6th District) when they paid a visit to Lite Tech Inc. in Audubon Tuesday.

Like many companies, Lite Tech, which manufactures lightweight X-ray protection products based on its patented Xenolite technology, was hit with a 2.3 percent tax on revenue starting Jan. 1, in one of several sources of funding that have been tapped to subsidize the Affordable Care Act, commonly known as Obamacare.

Toomey, a former restaurateur, said he was there to draw attention to the company, located at 975 Madison Ave., which was suffering from one of the most “egregious flaws” in Obamacare.

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“What this company makes is a really innovative product, a lightweight apron that protects medical personnel from the kind of radiation that they’re exposed to in the course of treating patients,” Toomey said.

“It’s an important product that improves the quality of healthcare by giving physicians and technicians greater comfort and flexibility while protecting them. (Lite Tech’s) reward for building a great product and employing Pennsylvanians is to be hit with a 2.3 percent tax on their sales, irrespective of profitability.”

The tax greatly diminishes the ability of companies that make medical devices to grow and reinvest in their businesses, Toomey added.

“The medical device industry is extremely important to Pennsylvania. We’re one of the industry leaders in medical device products that run a huge gamut from very sophisticated instruments used in surgery to the aprons that protect physicians and technicians. The people who work in this sector tend to have above average paying jobs. They sell more products overseas than they sell in the United States, so by any measure at all this is a really important industry and imposing this tax, singling out this industry and punishing this industry with a tax on its sales — irrespective of profitability — makes no sense. It’s costing us jobs and economic growth.”

The Medical Device Tax has been blamed as being at least partly responsible for massive job cuts at Massachusetts-based Boston Scientific and Michigan-based Stryker Corp., which develops and produces medical implants.

“I think it’s important to repeal this and I want to repeal all of Obamacare because it’s bad for our health care, bad for our economy and bad for our employment,” Toomey said. “But until we can repeal Obamacare, we need to take out the most egregious pieces, and that’s the Medical Device Tax.”

Gerlach noted that in Pennsylvania alone, a recent study indicated that the tax would put 40,000 jobs at risk.

“We have a lot of work ahead of us to try and deal with this issue. In Pennsylvania, we have over 20,000 people in the medical technology industry that will be challenged with this tax if we don’t repeal it. Now more than ever is a time to try to work both with the house and the senate on a bipartisan basis to figure out some way to get this tax repealed and all the other parts of Obamacare as well.”

The drive to repeal the 2010 federal health care law’s tax has garnered vigorous support in both the House and the Senate, noted Gerlach, who was hopeful that House Resolution 523 and its Senate companion bill 232 would achieve their repeal goals by the end of the year.

“Senator Toomey plays a very important role in the Senate finance committee for this legislation, so we know in the house we have an ally in Senator Toomey to address this issue as soon as possible,” Gerlach said.

In the meantime, the quarterly tax is being implemented, “right off the top of the gross receipts. And so it’s having a very negative impact on the ability of these businesses to hire more people and focus on more innovative ways to produce these products.”

“I think that’s really a key to this issue,” he said. “This is great example where you have bipartisan both in the house and the senate supporting the repeal. What’s interesting about this industry is that it runs from a guy working out of his garage all the way up to larger companies like Johnson & Johnson. So it’s a real neat ecosystem, where you have a lot of entrepreneurs starting new companies every day, to very large established companies as well.”

The Affordable Care Act, which was signed into law in the spring of 2010 and upheld by the Supreme Court last summer, was created to extend health care coverage to nearly 30 million uninsured people.

The Medical Device Tax was originally estimated to be $20 billion, but is now predicted by Congress to generate $30 billion in revenue over 30 years, Benner noted.

The most common ways companies are offsetting losses due to the tax are job reductions, job freezes and cuts to research and development, he said.

“Every company has different dynamics and addresses this in different ways, but at the end of the day… it’s very rare to see an excise tax, and traditionally the taxes are on vices such as gasoline, alcohol, ammunition. That’s what’s really unfortunate about this policy.”

The family-run Lite Tech Inc. was founded in Bridgeport in 1992 by Tom Krug, who acquired the patented Xenolyte technology pioneered by DuPont Industries, Inc.

Moving to a manufacturing facility in Audubon in 2007, the company, which employs 25 people, has now expanded the reach of its lead and lead-free products to more than 20 countries.

Although no layoffs have yet occurred at Lite Tech, Senator Toomey’s office disclosed that the Medical Device Tax would adversely affect the company to the tune of $115,000, minimum.